Essar Energy sees improving UK refining margins

Essar is now processing 11 crude grades at Stanlow, enabling it to take advantage of lower cost opportunities, and it said a new natural-gas supply, to fuel the plant's boilers, will allow more flexibility in the choice of crude oils it processes. Gross refining margins were $8.03/bbl in the period.

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By BEN WINKLEY

London-listed Essar Energy said Monday that performance at
its Stanlow refinery has markedly improved since
it took over the northwest England plant last year, as it
benefited from improved margins.

In its group interim report, Essar said its UK refining and
marketing operation recorded earnings before interest,
taxation, depreciation and amortization of $197.2 million in
the six months to Sept. 30, compared with $22.2 million in the
first eight months of ownership to March 31.

Gross refining margins were
$8.03/bbl in the period, compared with $3.10/bbl in the
first eight months of ownership, Essar said.

The company has an objective of adding over $3/bbl to refining margins at Stanlow within
the next two years, and said Monday it's already approaching an
increment of $1/bbl toward that.

Essar is now processing 11 crude grades at Stanlow, enabling
it to take advantage of lower cost opportunities, and it said a
new natural-gas supply, to fuel the plant's boilers, will allow
more flexibility in the choice of crude oils it processes.

Europe's refining industry has endured a
fraught time since the start of the economic crisis in 2008,
since then around 10 refineries have closed or sharply reduced
output as profit margins weakened amid lower demand for
products and higher prices for both crude and credit.

Although margins have been boosted this year in part as maintenance took out a large
proportion of Europe's production capacity in the
spring and autumn, Deutsche Bank, in a recent note to clients,
said it expects a softer margin environment ahead unless more of the
"surplus" capacity is removed from the market.

Most recent data from Euroilstock showed that product stocks
in the EU-15 & Norway region stood at a five-month high at
the end of October.

Essar bought the 296,000-bpd Stanlow refinery from Royal Dutch Shell for
$350 million. More than $800 million in capital was needed to
cover the cost of crude and refined products stored at the
plant.

In July, Essar struck an agreement with Barclays that saw the
UK bank agree to buy the inventories of crude and products at
Stanlow, and to supply crude to the refinery in line with its
requirements, to enable Essar's UK unit to repay a revolving
credit facility provided by 13 banks.

Dow Jones Newswires

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It is a really very good result shown by an Indian operator. Congrates for the achievement in such a short time duration.

Hirak Dutta11.28.2012

Incredible performance. However, would like to know what other measures have been taken to improve GRM by $5 per barrel. Surely only low crude cost was not the sole criteria. Further what about the refinery configuration- was it geared up to handle high S, high TAN crude. Interested to know the full story.